BILL NUMBER: AB 1894	CHAPTERED  07/24/00

	CHAPTER   201
	FILED WITH SECRETARY OF STATE   JULY 24, 2000
	APPROVED BY GOVERNOR   JULY 24, 2000
	PASSED THE ASSEMBLY   JULY 6, 2000
	PASSED THE SENATE   JUNE 29, 2000
	AMENDED IN SENATE   JUNE 12, 2000
	AMENDED IN SENATE   MAY 30, 2000
	AMENDED IN ASSEMBLY   MARCH 29, 2000

INTRODUCED BY   Assembly Member Ackerman

                        FEBRUARY 10, 2000

   An act to amend Sections 1108, 1113, 2113, 15677.1, 15677.2,
15677.3, 15677.4, 15677.8, 16908, 16914, 16915, 17540.1, 17540.2,
17540.3, 17540.4, 17540.8, 25103, and 25120 of, and to add Section
25005.1 to, the Corporations Code, relating to business entities.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1894, Ackerman.  Business entities:  mergers and conversions.
   Existing law relating to corporate mergers sets forth procedures
and filing requirements for merger transactions and establishes the
merger's effect on the surviving and disappearing corporations or
other business entities.
   This bill would add provisions regarding the date that the merger
of a domestic corporation and a foreign corporation or other business
entity would be effective and would make other related changes.
   Existing law, the Uniform Limited Partnership Act of 1994, the
Revised Limited Partnership Act, and the Beverly-Killea Limited
Liability Company Act, set forth the procedures and filing
requirements for conversion of a partnership, limited liability
company, or other business entity, both domestic and foreign, into
other business entities.
   This bill would provide that the filing with the Secretary of
State of an agreement or certificate of merger, a certificate of
conversion, a certification of partnership authority, or an
organizational document containing a statement of conversion, as
applicable, has the effect of filing a certificate of cancellation by
the disappearing other business entity, the converting partnership
or limited liability company, and, if the disappearing or converting
business entity is a foreign corporation, that entity would thereby
surrender its right to transact business in California.
   This bill would further specify that provisions covering the
conversion of business entities apply to foreign other business
entities that are either the converting or the converted entity.
   Existing law, the Corporate Securities Law of 1968, requires that
all offers and sales of securities be qualified in accordance with a
procedure that involves filing an application for qualification with
the Department of Corporations unless the offer or sale is expressly
exempted from the qualifications requirements, including certain
exchanges incident to a merger, consolidation, or sale of assets,
other than a rollup transaction, in consideration of the issuance of
equity securities if certain requirements are met.
   This bill would exempt from these qualifications equity conversion
transactions and any exchange of securities in connection with a
merger, consolidation, or sale of assets in consideration wholly or
in part of the issuance of securities or any equity conversion
transaction pursuant to a plan of reorganization or other arrangement
under the United States Bankruptcy Code.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1108 of the Corporations Code is amended to
read:
   1108.  (a) The merger of any number of domestic corporations with
any number of foreign corporations may be effected if the foreign
corporations are authorized by the laws under which they are formed
to effect the merger.  The surviving corporation may be any one of
the constituent corporations and shall continue to exist under the
laws of the state or place of its incorporation.
   (b) If the surviving corporation is a domestic corporation, the
merger proceedings with respect to that corporation and any domestic
disappearing corporation shall conform to the provisions of this
chapter governing the merger of domestic corporations, but if the
surviving corporation is a foreign corporation, then, subject to the
requirements of subdivision (d) and of Section 407 and Chapters 12
(commencing with Section 1200) and 13 (commencing with Section 1300)
(with respect to any domestic constituent corporations), the merger
proceedings may be in accordance with the laws of the state or place
of incorporation of the surviving corporation.
   (c) If the surviving corporation is a domestic corporation, the
agreement and the officers' certificate of each domestic or foreign
constituent corporation shall be filed as provided in Section 1103,
or the certificate of ownership shall be filed as provided in Section
1110, and thereupon, subject to subdivision (c) of Section 110, the
merger shall be effective as to each domestic constituent
corporation; and each foreign disappearing corporation that is
qualified for the transaction of intrastate business shall by virtue
of the filing, subject to subdivision (c) of Section 110,
automatically surrender its right to transact intrastate business.
   (d) If the surviving corporation is a foreign corporation, the
merger shall become effective in accordance with the law of the
jurisdiction in which it is organized, but, except as provided in
subdivision (e), the merger shall be effective as to any domestic
disappearing corporation as of the time of effectiveness in the
foreign jurisdiction upon the filing in this state as required by
this subdivision.  There shall be filed as to the domestic
disappearing corporation or corporations the documents described in
any one of the following paragraphs:
   (1) A copy of the agreement, certificate or other document filed
by the surviving foreign corporation in the state or place of its
incorporation for the purpose of effecting the merger, which copy
shall be certified by the public officer having official custody of
the original.
   (2) An executed counterpart of the agreement, certificate or other
document filed by the surviving foreign corporation in the state or
place of its incorporation for the purpose of effecting the merger.
   (3) A copy of the agreement of merger with an officers'
certificate of the surviving foreign corporation and of each
constituent domestic corporation attached, which officers'
certificates shall conform to the requirements of Section 1103.
   (4) A certificate of ownership pursuant to Section 1110.
   (e) If the date of the filing in this state pursuant to
subdivision (d) is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of the
domestic corporation are suspended at the time of effectiveness in
the foreign jurisdiction, the merger shall be effective as to the
domestic disappearing corporation or corporations as of the date of
filing in this state.  Each foreign disappearing corporation that is
qualified for the transaction of intrastate business shall, by virtue
of the filing pursuant to subdivision (d), automatically surrender
its right to transact intrastate business as of the date of filing in
this state regardless of the time of effectiveness as to a domestic
disappearing corporation.
   (f) The provisions of the last two sentences of Section 1101 and
Chapter 12 (commencing with Section 1200) and Chapter 13 (commencing
with Section 1300) apply to the rights of the shareholders of any of
the constituent corporations that are domestic corporations and of
any domestic corporation that is a parent party of any foreign
constituent corporation.
   (g) A certificate of satisfaction of the Franchise Tax Board shall
be filed when required by Section 1103 or 1110 or when required by
Section 23334 of the Revenue and Taxation Code.
  SEC. 2.  Section 1113 of the Corporations Code is amended to read:

   1113.  (a) Any one or more corporations may merge with one or more
other business entities (Section 174.5).  One or more domestic
corporations (Section 167) not organized under this division and one
or more foreign corporations (Section 171) may be parties to the
merger.  Notwithstanding the provisions of this section, the merger
of any number of corporations with any number of other business
entities may be effected only if:
   (1) In a merger in which a domestic corporation not organized
under this division or a domestic other business entity is a party,
it is authorized by the laws under which it is organized to effect
the merger.
   (2) In a merger in which a foreign corporation is a party, it is
authorized by the laws under which it is organized to effect the
merger.
   (3) In a merger in which a foreign other business entity is a
party, it is authorized by the laws under which it is organized to
effect the merger.
   (b) Each corporation and each other party which desires to merge
shall approve, and shall be a party to, an agreement of merger.
Other persons, including a parent party (Section 1200), may be
parties to the agreement of merger.  The board of each corporation
which desires to merge, and, if required the shareholders, shall
approve the agreement of merger.  The agreement of merger shall be
approved on behalf of each party by those persons required to approve
the merger by the laws under which it is organized.  The agreement
of merger shall state:
   (1) The terms and conditions of the merger.
   (2) The name and place of incorporation or organization of each
party to the merger and the identity of the surviving party.
   (3) The amendments, if any, subject to Sections 900 and 907, to
the articles of the surviving corporation, if applicable, to be
effected by the merger.  If any amendment changes the name of the
surviving corporation, if applicable, the new name may be, subject to
subdivision (b) of Section 201, the same as or similar to the name
of a disappearing party to the merger.
   (4) The manner of converting the shares of each constituent
corporation into shares, interests, or other securities of the
surviving party.  If any shares of any constituent corporation are
not to be converted solely into shares, interests or other securities
of the surviving party, the agreement of merger shall state (i) the
cash, rights, securities, or other property which the holders of
those shares are to receive in exchange for the shares, which cash,
rights, securities, or other property may be in addition to or in
lieu of shares, interests or other securities of the surviving party,
or (ii) that the shares are canceled without consideration.
   (5) Any other details or provisions required by the laws under
which any party to the merger is organized, including, if a public
benefit corporation or a religious corporation is a party to the
merger, Section 6019.1, or, if a mutual benefit corporation is a
party to the merger, Section 8019.1, or, if a consumer cooperative
corporation is a party to the merger, Section 12540.1, or, if a
domestic limited partnership is a party to the merger, Section
15678.2, or, if a domestic partnership is a party to the merger,
Section 16911, or, if a domestic limited liability company is a party
to the merger, Section 17551.
   (6) Any other details or provisions as are desired, including,
without limitation, a provision for the payment of cash in lieu of
fractional shares or for any other arrangement with respect thereto
consistent with the provisions of Section 407.
   (c) Each share of the same class or series of any constituent
corporation (other than the cancellation of shares held by a party to
the merger or its parent, or a wholly owned subsidiary of either, in
another constituent corporation) shall, unless all shareholders of
the class or series consent and except as provided in Section 407, be
treated equally with respect to any distribution of cash, rights,
securities, or other property.  Notwithstanding paragraph (4) of
subdivision (b), the nonredeemable common shares of a constituent
corporation may be converted only into nonredeemable common shares of
a surviving corporation or a parent party (Section 1200) or
nonredeemable equity securities of a surviving party other than a
corporation if another party to the merger or its parent owns,
directly or indirectly, prior to the merger shares of that
corporation representing more than 50 percent of the voting power of
that corporation, unless all of the shareholders of the class consent
and except as provided in Section 407.
   (d) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the agreement of merger or the
certificate of merger, as is applicable, if the amendment is approved
by the board of each constituent corporation and, if the amendment
changes any of the principal terms of the agreement, by the
outstanding shares (Section 152), if required by Chapter 12
(commencing with Section 1200), in the same manner as the original
agreement of merger.  If the agreement of merger as so amended and
approved is also approved by each of the other parties to the
agreement of merger, the agreement of merger as so amended shall then
constitute the agreement of merger.
   (e) The board of a constituent corporation may, in its discretion,
abandon a merger, subject to the contractual rights, if any, of
third parties, including other parties to the agreement of merger,
without further approval by the outstanding shares (Section 152), at
any time before the merger is effective.
   (f) Each constituent corporation shall sign the agreement of
merger by its chairperson of the board, president or a vice president
and also by its secretary or an assistant secretary acting on behalf
of their respective corporations.
   (g) (1) If the surviving party is a corporation or a foreign
corporation, or if a public benefit corporation (Section 5060), a
mutual benefit corporation (Section 5059), a religious corporation
(Section 5061), or a corporation organized under the Consumer
Cooperative Corporation Law (Section 12200) is a party to the merger,
after required approvals of the merger by each constituent
corporation through approval of the board (Section 151) and any
approval of the outstanding shares (Section 152) required by Chapter
12 (commencing with Section 1200) and by the other parties to the
merger, the surviving party shall file a copy of the agreement of
merger with an officers' certificate of each constituent domestic and
foreign corporation attached stating the total number of outstanding
shares or membership interests of each class entitled to vote on the
merger (and identifying any other person or persons whose approval
is required), that the agreement of merger in the form attached or
its principal terms, as required, were approved by that corporation
by a vote of a number of shares or membership interests of each class
that equaled or exceeded the vote required, specifying each class
entitled to vote and the percentage vote required of each class and,
if applicable, by that other person or persons whose approval is
required, or that the merger agreement was entitled to be and was
approved by the board alone (as provided in Section 1201, in the case
of corporations subject to that section).  If equity securities of a
parent party (Section 1200) are to be issued in the merger, the
officers' certificate of that controlled party shall state either
that no vote of the shareholders of the parent party was required or
that the required vote was obtained.  In lieu of an officers'
certificate, a certificate of merger, on a form prescribed by the
Secretary of State, shall be filed for each constituent other
business entity.  The certificate of merger shall be executed and
acknowledged by each domestic constituent limited liability company
by all managers of the limited liability company (unless a lesser
number is specified in its articles or organization or operating
agreement) and by each domestic constituent limited partnership by
all general partners (unless a lesser number is provided in its
certificate of limited partnership or partnership agreement) and by
each domestic constituent general partnership by two partners (unless
a lesser number is provided in its partnership agreement) and by
each foreign constituent limited liability company by one or more
managers and by each foreign constituent general partnership or
foreign constituent limited partnership by one or more general
partners, and by each constituent reciprocal insurer by the
chairperson of the board, president, or vice president, and by the
secretary or assistant secretary, or, if a constituent reciprocal
insurer has not appointed those officers, by the chairperson of the
board, president, or vice president, and by the secretary or
assistant secretary of the constituent reciprocal insurer's
attorney-in-fact, and by each other party to the merger by those
persons required or authorized to execute the certificate of merger
by the laws under which that party is organized, specifying for that
party the provision of law or other basis for the authority of the
signing persons.  The certificate of merger shall set forth, if a
vote of the shareholders, members, partners, or other holders of
interests of the constituent other business entity was required, a
statement setting forth the total number of outstanding interests of
each class entitled to vote on the merger and that the agreement of
merger in the form attached or its principal terms, as required, were
approved by a vote of the number of interests of each class that
equaled or exceeded the vote required, specifying each class entitled
to vote and the percentage vote required of each class, and any
other information required to be set forth under the laws under which
the constituent other business entity is organized, including, if a
domestic limited partnership is a party to the merger, subdivision
(a) of Section 15678.4, if a domestic partnership is a party to the
merger, subdivision (b) of Section 16915, and, if a domestic limited
liability company is a party to the merger, subdivision (a) of
Section 17552.  The certificate of merger for each constituent
foreign other business entity, if any, shall also set forth the
statutory or other basis under which that foreign other business
entity is authorized by the laws under which it is organized to
effect the merger.  The merger and any amendment of the articles of
the surviving corporation, if applicable, contained in the agreement
of merger shall be effective upon filing of the agreement of merger
with an officer's certificate of each constituent domestic and
foreign corporation and a certificate of merger for each constituent
other business entity, subject to subdivision (c) of Section 110 and
subject to the provisions of subdivision (j), and the several parties
thereto shall be one entity.  The agreement of merger shall not be
filed, however, until there has been filed by or on behalf of each
party to the merger taxed under the Bank and Corporation Tax Law, the
existence of which is terminated by the merger, the certificate of
satisfaction of the Franchise Tax Board that all taxes imposed by
that law have been paid or secured.  If a domestic reciprocal insurer
organized after 1974 to provide medical malpractice insurance is a
party to the merger, the agreement of merger or certificate of merger
shall not be filed until there has been filed the certificate issued
by the Insurance Commissioner approving the merger pursuant to
Section 1555 of the Insurance Code.  The Secretary of State may
certify a copy of the agreement of merger separate from the officers'
certificates and certificates of merger attached thereto.
   (2) If the surviving entity is an other business entity, and no
public benefit corporation (Section 5060), mutual benefit corporation
(Section 5059), religious corporation (Section 5061), or corporation
organized under the Consumer Cooperative Corporation Law (Section
12200) is a party to the merger, after required approvals of the
merger by each constituent corporation through approval of the board
(Section 151) and any approval of the outstanding shares (Section
152) required by Chapter 12 (commencing with Section 1200) and by the
other parties to the merger, the parties to the merger shall file a
certificate of merger in the office of, and on a form prescribed by,
the Secretary of State.  The certificate of merger shall be executed
and acknowledged by each constituent domestic and foreign corporation
by its chairperson of the board, president or a vice president and
also by its secretary or an assistant secretary and by each domestic
constituent limited liability company by all managers of the limited
liability company (unless a lesser number is specified in its
articles of organization or operating agreement) and by each domestic
constituent limited partnership by all general partners (unless a
lesser number is provided in its certificate of limited partnership
or partnership agreement) and by each domestic constituent general
partnership by two partners (unless a lesser number is provided in
its partnership agreement) and by each foreign constituent limited
liability company by one or more managers and by each foreign
constituent general partnership or foreign constituent limited
partnership by one or more general partners, and by each constituent
reciprocal insurer by the chairperson of the board, president, or
vice president, and by the secretary or assistant secretary, or, if a
constituent reciprocal insurer has not appointed those officers, by
the chairperson of the board, president, or vice president, and by
the secretary or assistant secretary of the constituent reciprocal
insurer's attorney-in-fact.  The certificate of merger shall be
signed by each other party to the merger by those persons required or
authorized to execute the certificate of merger by the laws under
which that party is organized, specifying for that party the
provision of law or other basis for the authority of the signing
persons.  The certificate of merger shall set forth all of the
following:
   (A) The name, place of incorporation or organization, and the
Secretary of State's file number, if any, of each party to the
merger, separately identifying the disappearing parties and the
surviving party.
   (B) If the approval of the outstanding shares of a constituent
corporation was required by Chapter 12 (commencing with Section
1200), a statement setting forth the total number of outstanding
shares of each class entitled to vote on the merger and that the
principal terms of the agreement of merger were approved by a vote of
the number of shares of each class entitled to vote and the
percentage vote required of each class.
   (C) The future effective date or time, not more than 90 days
subsequent to the date of filing of the merger, if the merger is not
to be effective upon the filing of the certificate of merger with the
office of the Secretary of State.
   (D) A statement, by each party to the merger which is a domestic
corporation not organized under this division, a foreign corporation,
or an other business entity, of the statutory or other basis under
which that party is authorized by the laws under which it is
organized to effect the merger.
   (E) Any other information required to be stated in the certificate
of merger by the laws under which each party to the merger is
organized, including, if a domestic limited liability company is a
party to the merger, subdivision (a) of Section 17552, if a domestic
partnership is a party to the merger, subdivision (b) of Section
16915, and, if a domestic limited partnership is a party to the
merger, subdivision (a) of Section 15678.4.
   (F) Any other details or provisions that may be desired.
   Unless a future effective date or time is provided in a
certificate of merger, in which event the merger shall be effective
at that future effective date or time, a merger shall be effective
upon the filing of the certificate of merger in the office of the
Secretary of State and the several parties thereto shall be one
entity.  The certificate of merger shall not be filed, however, until
there has been filed by or on behalf of each party to the merger
that is taxed under the Bank and Corporation Tax Law, the existence
of which is terminated by the merger, the certificate of satisfaction
of the Franchise Tax Board that all taxes imposed by the Bank and
Corporation Tax Law have been paid or secured.  The surviving other
business entity shall keep a copy of the agreement of merger at its
principal place of business which, for purposes of this subdivision,
shall be the office referred to in Section 17057 if a domestic
limited liability company, at the business address specified in
paragraph (5) of subdivision (a) of Section 17552 if a foreign
limited liability company, at the office referred to in subdivision
(a) of Section 16403 if a domestic general partnership, at the
business address specified in subdivision (f) of Section 16911 if a
foreign partnership, at the office referred to in subdivision (a) of
Section 15614 if a domestic limited partnership, or at the business
address specified in paragraph (5) of subdivision (a) of Section
15678.4 if a foreign limited partnership.  Upon the request of a
holder of equity securities of a party to the merger, a person with
authority to do so on behalf of the surviving other business entity
shall promptly deliver to that holder, a copy of the agreement of
merger.  A waiver by that holder of the rights provided in the
foregoing sentence shall be unenforceable.  If a domestic reciprocal
insurer organized after 1974 to provide medical malpractice insurance
is a party to the merger the agreement of merger or certificate of
merger shall not be filed until there has been filed the certificate
issued by the Insurance Commissioner approving the merger in
accordance with Section 1555 of the Insurance Code.
   (h) (1) A copy of an agreement of merger certified on or after the
effective date by an official having custody thereof has the same
force in evidence as the original and, except as against the state,
is conclusive evidence of the performance of all conditions precedent
to the merger, the existence on the effective date of the surviving
party to the merger and the performance of the conditions necessary
to the adoption of any amendment to the articles, if applicable,
contained in the agreement of merger.
   (2) For all purposes for a merger in which the surviving entity is
a domestic other business entity and the filing of a certificate of
merger is required by paragraph (2) of subdivision (g), a copy of the
certificate of merger duly certified by the Secretary of State is
conclusive evidence of the merger of the constituent corporations,
either by themselves or together with the other parties to the
merger, into the surviving other business entity.
   (i) (1) Upon a merger pursuant to this section, the separate
existences of the disappearing parties to the merger cease and the
surviving party to the merger shall succeed, without other transfer,
to all the rights and property of each of the disappearing parties to
the merger and shall be subject to all the debts and liabilities of
each in the same manner as if the surviving party to the merger had
itself incurred them.
   (2) All rights of creditors and all liens upon the property of
each of the constituent corporations and other parties to the merger
shall be preserved unimpaired, provided that those liens upon
property of a disappearing party shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
   (3) Any action or proceeding pending by or against any
disappearing corporation or disappearing party to the merger may be
prosecuted to judgment, which shall bind the surviving party, or the
surviving party may be proceeded against or substituted in its place.

   (4) If a limited partnership or a general partnership is a party
to the merger, nothing in this section is intended to affect the
liability a general partner of a disappearing limited partnership or
general partnership may have in connection with the debts and
liabilities of the disappearing limited partnership or general
partnership existing prior to the time the merger is effective.
   (j) (1) The merger of domestic corporations with foreign
corporations or foreign other business entities in a merger in which
one or more other business entities is a party shall comply with
subdivision (a) and this subdivision.
   (2) If the surviving party is a domestic corporation or domestic
other business entity, the merger proceedings with respect to that
party and any domestic disappearing corporation shall conform to the
provisions of this section.  If the surviving party is a foreign
corporation or foreign other business entity, then, subject to the
requirements of subdivision (c), and of Section 407 and Chapter 12
(commencing with Section 1200) and Chapter 13 (commencing with
Section 1300), and, if applicable, corresponding provisions of the
Nonprofit Corporation Law or the Consumer Cooperative Corporation
Law, with respect to any domestic constituent corporations, Chapter
13 (commencing with Section 17600) of Title 2.5 with respect to any
domestic constituent limited liability companies, Article 6
(commencing with Section 16601) of Chapter 5 of Title 2 with respect
to any domestic constituent general partnerships, and Article 7.6
(commencing with Section 15679.1) of Chapter 3 of Title 2 with
respect to any domestic constituent limited partnerships, the merger
proceedings may be in accordance with the laws of the state or place
of incorporation or organization of the surviving party.
   (3) If the surviving party is a domestic corporation or domestic
other business entity, the certificate of merger or the agreement of
merger with attachments shall be filed as provided in subdivision (g)
and thereupon, subject to subdivision (c) of Section 110 or
paragraph (2) of subdivision (g), as is applicable, the merger shall
be effective as to each domestic constituent corporation and domestic
constituent other business entity.
                           (4) If the surviving party is a foreign
corporation or foreign other business entity, the merger shall become
effective in accordance with the law of the jurisdiction in which
the surviving party is organized, but, except as provided in
paragraph (5), the merger shall be effective as to any domestic
disappearing corporation as of the time of effectiveness in the
foreign jurisdiction upon the filing in this state of a copy of the
agreement of merger with an officers' certificate of each constituent
foreign and domestic corporation and a certificate of merger of each
constituent other business entity attached, which officers'
certificates and certificates of merger shall conform to the
requirements of paragraph (1) of subdivision (g).  If one or more
domestic other business entities is a disappearing party in a merger
pursuant to this subdivision in which a foreign other business entity
is the surviving entity, a certificate of merger required by the
laws under which that domestic other business entity is organized,
including subdivision (a) of Section 15678.4, subdivision (b) of
Section 16915, or subdivision (a) of Section 17552, as is applicable,
shall also be filed at the same time as the filing of the agreement
of merger.
   (5) If the date of the filing in this state pursuant to this
subdivision is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of a
domestic disappearing corporation are suspended at the time of
effectiveness in the foreign jurisdiction, the merger shall be
effective as to the domestic disappearing corporation as of the date
of filing in this state.
   (6) In a merger described in paragraph (3) or (4), each foreign
disappearing corporation that is qualified for the transaction of
intrastate business shall by virtue of the filing pursuant to this
subdivision, subject to subdivision (c) of Section 110, automatically
surrender its right to transact intrastate business in this state.
The filing of the agreement of merger or certificate of merger, as is
applicable, pursuant to this subdivision, by a disappearing foreign
other business entity registered for the transaction of intrastate
business in this state shall, by virtue of that filing, subject to
subdivision (c) of Section 110, automatically cancels the
registration for that foreign other business entity, without the
necessity of the filing of a certificate of cancellation.
   (7) A certificate of satisfaction of the Franchise Tax Board for
each disappearing party to the merger shall be filed when required by
subdivision (g) or when required by Section 23334 of the Revenue and
Taxation Code.
  SEC. 3.  Section 2113 of the Corporations Code is amended to read:

   2113.  (a) The filing of an agreement of merger of a foreign
disappearing corporation qualified to transact intrastate business in
this state pursuant to Section 1103, or the filing pursuant to
subdivision (d) of Section 1108 of an agreement, certificate, or
other document as to a merger that includes a disappearing foreign
corporation qualified to transact intrastate business, or the filing
of a certificate of ownership as to a foreign subsidiary corporation
qualified to transact intrastate business in this state pursuant to
Section 1110, or the filing by a foreign corporation qualified to
transact intrastate business in this state of an organizational
document containing a statement of conversion pursuant to Section
15677.8, 16908, or 17540.8, constitutes the surrender by the foreign
corporation of its right to engage in intrastate business within this
state.
   (b) With respect to corporations for which documents have not been
filed as provided in subdivision (a), a certificate of surrender as
prescribed by Section 2112 shall be filed by a foreign corporation
qualified to transact intrastate business upon its merger into
another foreign corporation.
   (c) In lieu of a signature as prescribed by Section 2112, a
certificate of surrender pursuant to subdivision (b) for a merged
foreign corporation may be signed in the name of the surviving
corporation by an officer thereof.  In that case, the certificate of
surrender shall be accompanied by a certificate of an authorized
public official of the state or place of incorporation of the merged
foreign corporation stating that the corporation has been merged into
another foreign corporation and setting forth the name and state or
place of incorporation of the surviving foreign corporation.
  SEC. 4.  Section 15677.1 of the Corporations Code is amended to
read:
   15677.1.  For purposes of this article, the following definitions
shall apply:
   (a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited partnership that results
from a conversion of a domestic limited partnership under this
chapter.
   (b) "Converted limited partnership" means a domestic limited
partnership that results from a conversion of an other business
entity or a foreign other business entity or a foreign limited
partnership pursuant to Section 15677.8.
   (c) "Converting limited partnership" means a domestic limited
partnership that converts to an other business entity or a foreign
other business entity or a foreign limited partnership pursuant to
this chapter.
   (d) "Converting entity" means an other business entity or a
foreign other business entity or a foreign limited partnership that
converts to a domestic limited partnership pursuant to the terms of
Section 15677.8.
  SEC. 5.  Section 15677.2 of the Corporations Code is amended to
read:
   15677.2.  A limited partnership may be converted into an other
business entity or a foreign other business entity or a foreign
limited partnership pursuant to this article if, pursuant to the
proposed conversion, each of the partners of the converting limited
partnership receives a percentage interest in the profits and capital
of the converted entity equal to that partner's percentage interest
in profits and capital of the converting limited partnership as of
the effective time of the conversion.  The conversion of a limited
partnership to an other business entity or a foreign other business
entity or a foreign limited partnership may be effected only if both
of the following conditions are satisfied:
   (a) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
   (b) The limited partnership complies with all other requirements
of any other law that applies to conversion to the converted entity.

  SEC. 6.  Section 15677.3 of the Corporations Code is amended to
read:
   15677.3.  (a) A limited partnership that desires to convert to an
other business entity or a foreign other business entity or a foreign
limited partnership shall approve a plan of conversion.  The plan of
conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The place of the organization of the converted entity and of
the converting limited partnership and the name of the converted
entity after conversion.
   (3) The manner of converting the limited and general partnership
interests of each of the partners into securities of, or interests
in, the converted entity.
   (4) The provisions of the governing documents for the converted
entity, including the partnership agreement or limited liability
company articles of organization and operating agreement, to which
the holders of interests in the converted entity are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the parties.
   (b) The plan of conversion shall be approved by all general
partners of the converting limited partnership and by a majority in
interest of each class of limited partners of the converting limited
partnership, unless a greater or lesser approval is required by the
partnership agreement of the converting limited partnership.
However, if the limited partners of the limited partnership would
become personally liable for any obligations of the converted entity
as a result of the conversion, the plan of conversion shall be
approved by all of the limited partners of the converting limited
partnership, unless the plan of conversion provides that all limited
partners will have dissenters' rights as provided in Article 7.6
(commencing with Section 15679.1).
   (c) Upon the effectiveness of the conversion, all partners of the
converting limited partnership, except those that exercise dissenters'
rights as provided in Article 7.6 (commencing with Section 15679.1),
shall be deemed parties to any governing documents for the converted
entity adopted as part of the plan of conversion, irrespective of
whether or not the partner has executed the plan of conversion or the
governing documents for the converted entity.  Any adoption of
governing documents made pursuant thereto shall be effective at the
effective time or date of the conversion.
   (d) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by all general partners of the converting limited
partnership and, if the amendment changes any of the principal terms
of the plan of conversion, the amendment is approved by the limited
partners of the converting limited partnership in the same manner and
to the same extent as required for the approval of the original plan
of conversion.
   (e) The general partners of a converting limited partnership may,
by unanimous approval at any time before the conversion is effective,
in their discretion, abandon a conversion, without further approval
by the limited partners, subject to the contractual rights of third
parties other than limited partners.
   (f) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership or foreign other business entity or
at the office at which records are to be kept under Section 17057 if
the converted entity is a domestic limited liability company.  Upon
the request of a partner of a converting limited partnership, the
authorized person on behalf of the converted entity shall promptly
deliver to the partner or the holder of interests or other
securities, at the expense of the converted entity, a copy of the
plan of conversion.  A waiver by a partner of the rights provided in
this subdivision shall be unenforceable.
  SEC. 7.  Section 15677.4 of the Corporations Code is amended to
read:
   15677.4.  (a) A conversion into an other business entity or a
foreign other business entity or a foreign limited partnership shall
become effective upon the earliest date that all of the following
occur:
   (1) The approval of the plan of conversion by the partners of the
converting limited partnership as provided in Section 15677.3.
   (2) The filing of all documents required by law to create the
converted entity, which documents shall also contain a statement of
conversion, if required under Section 15677.6.
   (3) The occurrence of the effective date, if set forth in the plan
of conversion occurs.
   (b) A copy of the statement of partnership authority or articles
of organization complying with Section 15677.6, if applicable, duly
certified by the Secretary of State, is conclusive evidence of the
conversion of the limited partnership.
  SEC. 8.  Section 15677.8 of the Corporations Code is amended to
read:
   15677.8.  (a) An other business entity or a foreign other business
entity or a foreign limited partnership may be converted to a
domestic limited partnership pursuant to this article only if the
converting entity is authorized by the laws under which it is
organized to effect the conversion.
   (b) An other business entity or a foreign other business entity or
a foreign limited partnership that desires to convert into a
domestic limited partnership shall approve a plan of conversion or an
other instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.

   (c) The conversion of an other business entity or a foreign other
business entity or a foreign limited partnership into a domestic
limited partnership shall be approved by the number or percentage of
the partners, members, or holders of interest of the converting
entity as is required by the laws under which that entity is
organized, or a greater or lesser percentage, subject to applicable
laws, as set forth in the converting entity's partnership agreement,
articles of organization, operating agreement, or other governing
document.
   (d) The conversion by an other business entity or a foreign other
business entity or a foreign limited partnership into a domestic
limited partnership shall be effective under this article at the time
the conversion is effective under the laws under which the
converting entity is organized as long as a certificate of limited
partnership containing a statement of conversion has been filed with
the Secretary of State.  If the converting entity's governing law is
silent as to the effectiveness of the conversion, the conversion
shall be effective upon the completion of all acts required under
this title to form a limited partnership.
   (e) The filing with the Secretary of State of a certificate of
conversion or a certificate of limited partnership containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15696 or 17455 as a
result of that conversion.  If a converting other business entity is
a foreign corporation qualified to transact business in this state,
the foreign corporation shall, by virtue of the filing, automatically
surrender its right to transact intrastate business.
  SEC. 9.  Section 16908 of the Corporations Code is amended to read:

   16908.  (a) A domestic limited partnership or limited liability
company or a foreign other business entity may be converted to a
domestic partnership pursuant to this article, but only if the
converting entity is authorized by the laws under which it is
organized to effect the conversion.
   (b) An entity that desires to convert into a domestic partnership
shall approve a plan of conversion or the instrument that is required
to be approved to effect the conversion pursuant to the laws under
which the entity is organized.
   (c) The conversion of a domestic limited partnership or limited
liability company or foreign other business entity shall be approved
by the number or percentage of the partners, members, or holders of
interest of the converting entity as is required by the law under
which the entity is organized, or a greater or lesser percentage
(subject to applicable laws) as set forth in the limited partnership
agreement, articles of organization, or operating agreement or other
governing document for the converting entity.
   (d) The conversion by a domestic limited partnership or limited
liability company or a foreign other business entity into a
partnership shall be effective under this article at the time that
the conversion is effective under the laws under which the converting
entity is organized.
   (e) The filing with the Secretary of State of a certificate of
conversion or a statement of partnership authority containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company, and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15696 or 17455 as a
result of that conversion.  If a converting other business entity is
a foreign corporation qualified to transact business in this state,
the foreign corporation shall, by virtue of the filing, automatically
surrender its right to transact intrastate business.
  SEC. 10.  Section 16914 of the Corporations Code is amended to
read:
   16914.  (a) When a merger takes effect, all of the following
apply:
   (1) The separate existence of the disappearing partnerships and
disappearing other business entities ceases and the surviving
partnership or surviving other business entity shall succeed, without
other transfer, act or deed, to all the rights and property whether
real, personal, or mixed, of each of the disappearing partnerships
and disappearing other business entities and shall be subject to all
the debts and liabilities of each in the same manner as if the
surviving partnership or surviving other business entity had itself
incurred them.
   (2) All rights of creditors and all liens upon the property of
each of the constituent partnerships and constituent other business
entities shall be preserved unimpaired and may be enforced against
the surviving partnership or the surviving other business entity to
the same extent as if the debt, liability or duty that gave rise to
that lien had been incurred or contracted by it, provided that those
liens upon the property of a disappearing partnership or disappearing
other business entity shall be limited to the property affected
thereby immediately prior to the time the merger is effective.
   (3) Any action or proceeding pending by or against any
disappearing partnership or disappearing other business entity may be
prosecuted to judgment, which shall bind the surviving partnership
or surviving other business entity, or the surviving partnership or
surviving other business entity may be proceeded against or be
substituted in the disappearing partnership's or the disappearing
other business entity's place.
   (b) (1) Unless a certificate of merger has been filed to effect
the merger, the surviving foreign entity shall promptly notify the
Secretary of State of the mailing address of its agent for service of
process, its chief executive office, and of any change of address.
To enforce an obligation of a partnership that has merged with a
foreign partnership or foreign other business entity, the Secretary
of State shall only be the agent for service of process in an action
or proceeding against the surviving foreign partnership or foreign
other business entity, if the agent designated for the service of
process for that entity is a natural person and cannot be located
with due diligence or if the agent is a corporation and no person to
whom delivery may be made can be located with due diligence, or if no
agent has been designated and if no one of the officers, partners,
managers, members, or agents of the entity can be located after
diligent search, and it is so shown by affidavit to the satisfaction
of the court.  The court then may make an order that service be made
by personal delivery to the Secretary of State or to an assistant or
deputy Secretary of State of two copies of the process together with
two copies of the order, and the order shall set forth an address to
which the process shall be sent by the Secretary of State.  Service
in this manner is deemed complete on the 10th day after delivery of
the process to the Secretary of State.
   (2) Upon receipt of the process and order and the fee set forth in
Section 12206 of the Government Code, the Secretary of State shall
give notice to the entity of the service of the process by forwarding
by certified mail, return receipt requested, a copy of the process
and order to the address specified in the order.
   (3) The Secretary of State shall keep a record of all process
served upon the Secretary of State and shall record therein the time
of service and the Secretary of State's action with respect thereto.
The certificate of the Secretary of State, under the Secretary of
State's official seal, certifying to the receipt of process, the
giving of notice thereof to the entity, and the forwarding of the
process, shall be competent and prima facie evidence of the matters
stated therein.
   (c) A partner of the surviving partnership or surviving limited
partnership, a member of the surviving limited liability company, a
shareholder of the surviving corporation, or a holder of equity
securities of the surviving other business entity, is liable for all
of the following:
   (1) All obligations of a party to the merger for which that person
was personally liable before the merger.
   (2) All other obligations of the surviving entity incurred before
the merger by a party to the merger, but those obligations may be
satisfied only out of property of the entity.
   (3) All obligations of the surviving entity incurred after the
merger takes effect, but those obligations may be satisfied only out
of property of the entity if that person is a limited partner, a
shareholder in a corporation, or, unless expressly provided otherwise
in the articles of organization or other constituent documents, a
member of a limited liability company or a holder of equity
securities in a surviving other business entity.
   (d) If the obligations incurred before the merger by a party to
the merger are not satisfied out of the property of the surviving
partnership or surviving other business entity, the general partners
of that party immediately before the effective date of the merger, to
the extent that party was a partnership or a limited partnership,
shall contribute the amount necessary to satisfy that party's
obligations to the surviving entity in the manner provided in Section
16807 or in the limited partnership act of the jurisdiction in which
the party was formed, as the case may be, as if the merged party
were dissolved.
   (e) A partner of a domestic disappearing partnership who does not
vote in favor of the merger and does not agree to become a partner,
member, shareholder, or holder of interest or equity securities of
the surviving partnership or surviving other business entity shall
have the right to dissociate from the partnership as of the date the
merger takes effect.  Within 10 days after the approval of the merger
by the partners as required under this article, each domestic
disappearing partnership shall send notice of the approval of the
merger to each partner that has not approved the merger, accompanied
by a copy of Section 16701 and a brief description of the procedure
to be followed under that section if the partner wishes to dissociate
from the partnership.  A partner that desires to dissociate from a
disappearing partnership shall send written notice of that
dissociation within 30 days after the date of the notice of the
approval of the merger.  The disappearing partnership shall cause the
partner's interest in the entity to be purchased under Section
16701.  The surviving entity is bound under Section 16702 by an act
of a general partner dissociated under this subdivision, and the
partner is liable under Section 16703 for transactions entered into
by the surviving entity after the merger takes effect.  The
disassociation of a partner in connection with a merger pursuant to
the terms of this subdivision shall not be deemed a wrongful
disassociation under Section 16602.
  SEC. 11.  Section 16915 of the Corporations Code is amended to
read:
   16915.  (a) In a merger involving a domestic partnership, in which
another partnership or a foreign other business entity is a party,
but in which no other domestic other business entity is a party, the
surviving partnership or surviving foreign other business entity may
file with the Secretary of State a statement that one or more
partnerships have merged into the surviving partnership or surviving
foreign other business entity, or that one or more partnerships or
foreign other business entities have merged into the surviving
domestic partnership.  A statement of merger shall contain the
following:
   (1) The name of each partnership or foreign other business entity
that is a party to the merger.
   (2) The name of the surviving entity into which the other
partnerships or foreign other business entities were merged.
   (3) The street address of the surviving entity's chief executive
office and of an office in this state, if any.
   (4) Whether the surviving entity is a partnership or a foreign
other business entity, specifying the type of the entity.
   (b) In a merger involving a domestic partnership in which a
domestic other business entity is also a party, after approval of the
merger by the constituent partnerships and any constituent other
business entities, the constituent partnerships and constituent other
business entities shall file a certificate of merger in the office
of, and on a form prescribed by, the Secretary of State, but if the
surviving entity is a domestic corporation or a foreign corporation
in a merger in which a domestic corporation is a constituent party,
the surviving corporation shall file in the office of the Secretary
of State a copy of the agreement of merger and attachments required
under paragraph (1) of subdivision (g) of Section 1113.  The
certificate of merger shall be executed and acknowledged by each
domestic constituent partnership by two partners (unless a lesser
number is provided in the partnership agreement) and by each foreign
constituent partnership by one or more partners, and by each
constituent other business entity by those persons required to
execute the certificate of merger by the laws under which the
constituent other business entity is organized.  The certificate of
merger shall set forth all of the following:
   (1) The names and the Secretary of State's file numbers, if any,
of each of the constituent partnerships and constituent other
business entities, separately identifying the disappearing
partnerships and disappearing other business entities and the
surviving partnership or surviving other business entity.
   (2) If a vote of the partners was required under Section 16911, a
statement that the principal terms of the agreement of merger were
approved by a vote of the partners, which equaled or exceeded the
vote required.
   (3) If the surviving entity is a domestic partnership and not an
other business entity, any change to the information set forth in any
filed statement of partnership authority of the surviving
partnership resulting from the merger, including any change in the
name of the surviving partnership resulting from the merger.  The
filing of a certificate of merger setting forth any changes to any
filed statement of partnership authority of the surviving partnership
shall                                              have the effect
of the filing of a certificate of amendment of the statement of
partnership authority by the surviving partnership, and the surviving
partnership need not file a certificate of amendment under Section
16015 to reflect those changes.
   (4) The future effective date or time (which shall be a date or
time certain not more than 90 days subsequent to the date of filing)
of the merger, if the merger is not to be effective upon the filing
of the certificate of merger with the office of the Secretary of
State.
   (5) If the surviving entity is an other business entity or a
foreign partnership, the full name, type of entity, legal
jurisdiction in which the entity was organized and by whose laws its
internal affairs are governed, and the address of the principal place
of business of the entity.
   (6) Any other information required to be stated in the certificate
of merger by the laws under which each constituent other business
entity is organized.
   (c) A statement of merger or a certificate of merger, as is
applicable under subdivision (a) or (b), shall have the effect of the
filing of a cancellation for each disappearing partnership of any
statement of partnership authority filed by it.
  SEC. 12.  Section 17540.1 of the Corporations Code is amended to
read:
   17540.1.  For purposes of this chapter, the following definitions
shall apply:
   (a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited liability company that
results from a conversion of a domestic limited liability company
under this chapter.
   (b) "Converted limited liability company" means a domestic limited
liability company that results from a conversion of an other
business entity or a foreign other business entity or a foreign
limited liability company pursuant to Section 17540.8.
   (c) "Converting limited liability company" means a domestic
limited liability company that converts to an other business entity
or a foreign other business entity or a foreign limited liability
company pursuant to this chapter.
   (d) "Converting entity" means an other business entity or a
foreign other business entity or a foreign limited liability company
that converts to a domestic limited liability company pursuant to the
terms of Section 17540.8.
  SEC. 13.  Section 17540.2 of the Corporations Code is amended to
read:
   17540.2.  A limited liability company may be converted into an
other business entity or a foreign other business entity or a foreign
limited liability company pursuant to this chapter if, pursuant to
the proposed conversion, each of the members of the converting
limited liability company would receive a percentage interest in
profits and capital of the converted entity equal to that member's
percentage interest in profits and capital of the converting limited
liability company as of the effective time of the conversion.
Notwithstanding this section, the conversion of a limited liability
company to an other business entity or a foreign other business
entity or a foreign limited liability company may be effected only if
both of the following conditions are complied with:
   (a) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
   (b) The limited liability company complies with any and all other
requirements of any other law that applies to conversion to the
converted entity.
  SEC. 14.  Section 17540.3 of the Corporations Code is amended to
read:
   17540.3.  (a) A limited liability company that desires to convert
to an other business entity or a foreign other business entity or a
foreign limited liability company shall approve a plan of conversion.

   The plan of conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The place of the organization of the converted entity and of
the converting limited liability company and the name of the
converted entity after conversion.
   (3) The manner of converting the membership interests of each of
the members into securities of, or interests in, the converted
entity.
   (4) The provisions of the governing documents for the converted
entity, including the partnership agreement, to which the holders of
interests in the converted entity are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the parties.
   (b) The plan of conversion shall be approved by a vote of a
majority in interest of the members of the converting limited
liability company, or a greater percentage of the voting interests of
members as may be specified in the articles of organization or
written operating agreement of the converting limited liability
company.  However, if the members of the limited liability company
would become personally liable for any obligations of the converted
entity as a result of the conversion, the plan of conversion shall be
approved by all of the members of the converting limited liability
company, unless the plan of conversion provides that all members will
have dissenters' rights as provided in Chapter 13 (commencing with
Section 17600).
   (c) If the limited liability company is converting into a limited
partnership, then in addition to the approval of the members set
forth in subdivision (b), the plan of conversion shall be approved by
those members who will become general partners of the converted
limited partnership pursuant to the plan of conversion.
   (d) Upon the effectiveness of the conversion, all members of the
converting limited liability company, except those that exercise
dissenters' rights as provided in Chapter 13 (commencing with Section
17600) shall be deemed parties to any governing documents for the
converted entity adopted as part of the plan of conversion,
irrespective of whether or not a member has executed the plan of
conversion or such governing documents for the converted entity.  Any
adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
   (e) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by the members of the converting limited liability company
in the same manner as was required for approval of the original plan
of conversion.
   (f) A plan of conversion may be abandoned by the members of a
converting limited liability company in the manner as required for
approval of the plan of conversion, subject to the contractual rights
of third parties, at any time before the conversion is effective.
   (g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership or foreign other business entity or
at the office at which records are to be kept under Section 15614 if
the converted entity is a domestic limited partnership. Upon the
request of a member of a converting limited liability company, the
authorized person on behalf of the converted entity shall promptly
deliver to the member or the holder of interests or other securities,
at the expense of the converted entity, a copy of the plan of
conversion.  A waiver by a member of the rights provided in this
subdivision shall be unenforceable.
  SEC. 15.  Section 17540.4 of the Corporations Code is amended to
read:
   17540.4.  (a) A conversion into an other business entity or a
foreign other business entity or a foreign limited liability company
shall become effective upon the earliest date that all of the
following occur:
   (1) The approval of the plan of conversion by the members of the
converting limited liability company as provided in Section 17540.3.

   (2) The filing of all documents required by law to effect the
conversion and create the converted entity, which documents shall
also contain a statement of conversion, if required under Section
17540.6.
   (3) The occurrence of the effective date, if set forth in the plan
of conversion.
   (b) A copy of the statement of partnership authority or
certificate of limited partnership complying with Section 17540.6, if
applicable, duly certified by the Secretary of State, is conclusive
evidence of the conversion of the limited liability company.
  SEC. 16.  Section 17540.8 of the Corporations Code is amended to
read:
   17540.8.  (a) An other business entity or a foreign other business
entity or a foreign limited liability company may be converted to a
domestic limited liability company pursuant to this chapter only if
the converting entity is authorized by the laws under which it is
organized to effect the conversion.
   (b) An other business entity or a foreign other business entity or
a foreign limited liability company that desires to convert into a
domestic limited liability company shall approve a plan of conversion
or an other instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.

   (c) The conversion of an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be approved by that number
or percentage of the partners, members, or holders of interest of the
converting entity as is required by the laws under which that entity
is organized, or a greater or lesser percentage, subject to
applicable laws, as set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, or other
governing document.
   (d) The conversion by an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be effective under this
chapter at the time the conversion is effective under the laws under
which the converting entity is organized as long as the articles of
organization containing a statement of conversion have been filed
with the Secretary of State.  If the converting entity's governing
law is silent as to the effectiveness of the conversion, the
conversion shall be effective upon the completion of all acts
required under this title to form a limited liability company.
   (e) The filing with the Secretary of State of a certificate of
conversion or articles of organization containing a statement of
conversion pursuant to subdivision (a) shall have the effect of the
filing of a certificate of cancellation by the converting foreign
limited liability company or foreign limited partnership, and no
converting foreign limited liability company or foreign limited
partnership that has made the filing is required to file a
certificate of cancellation under Section 15696 or 17455 as a result
of that conversion.  If a converting other business entity is a
foreign corporation qualified to transact business in this state, the
foreign corporation shall, by virtue of the filing, automatically
surrender its right to transact intrastate business.
  SEC. 17.  Section 25005.1 is added to the Corporations Code, to
read:
   25005.1.  "Entity conversion transaction" means a conversion
pursuant to Section 15677.2, 15677.8, 16902, 16908, 17540.2, or
17540.8 unless the interests in the entity resulting from the
conversion to be held by the equity holders of the entity being
converted as a result of the conversion are not securities.  For
purposes of Sections 25103 and 25120 an entity conversion transaction
is not a change in the rights, preferences, privileges, or
restrictions of or on outstanding securities or an exchange of
securities by the issuer with its existing security holders
exclusively.
  SEC. 18.  Section 25103 of the Corporations Code is amended to
read:
   25103.  The following transactions are exempted from the
provisions of Section 25110 and Section 25120:
   (a) Any negotiations or agreements prior to general solicitation
of approval by the holders of equity securities, and subject to that
approval, of (1) a change in the rights, preferences, privileges, or
restrictions of or on outstanding securities (2) a merger,
consolidation, or sale of assets in consideration of the issuance of
securities or (3) an entity conversion transaction.
   (b) Any change in the rights, preferences, privileges, or
restrictions of or on outstanding securities or any entity conversion
transaction, unless the holders of at least 25 percent of the
outstanding shares or units of any class of securities which will be
directly or indirectly affected substantially and adversely by such
change or transaction have addresses in this state according to the
records of the issuer.
   (c) Any exchange incident to a merger, consolidation, or sale of
assets in consideration of the issuance of securities of another
issuer, unless at least 25 percent of the outstanding securities of
any class, any holders of which are to receive securities in the
exchange, are held by persons who have addresses in this state,
according to the records of the issuer of which they are holders.
This exemption is not available for a rollup transaction as defined
by Section 25014.6.  The exemption is also not available for a
transaction excluded from the definition of rollup transaction by
virtue of paragraph (5) or (6) of subdivision (b) of Section 25014.6
if the transaction is one of a series of transactions that directly
or indirectly through acquisition or otherwise involves the
combination or reorganization of one or more rollup participants.
   (d) For the purposes of subdivision (b) and subdivision (c) of
this section, (1) any securities held to the knowledge of the issuer
in the names of broker-dealers or nominees of broker-dealers and (2)
any securities controlled by any one person who controls directly or
indirectly 50 percent or more of the outstanding securities of that
class shall not be considered outstanding.  The determination of
whether 25 percent of the outstanding securities are held by persons
having addresses in this state, for the purposes of subdivision (b)
and subdivision (c) of this section, shall be made as of the record
date for the determination of the security holders entitled to vote
on or consent to the action, if approval of those holders is
required, or if not as of the date of directors' approval of that
action.
   (e) Any change (other than a stock split or reverse stock split)
in the rights, preferences, privileges, or restrictions of or on
outstanding equity securities, except the following if they
materially and adversely affect any class of equity securities:  (1)
to add, change, or delete assessment provisions; (2) to change the
rights to dividends thereon; (3) to change the redemption provisions;
(4) to make them redeemable; (5) to change the amount payable on
liquidation; (6) to change, add, or delete conversion rights; (7) to
change, add, or delete voting rights; (8) to change, add, or delete
preemptive rights; (9) to change, add, or delete sinking fund
provisions; (10) to rearrange the relative priorities of outstanding
equity securities; (11) to impose, change, or delete restrictions
upon the transfer of equity securities in the organizational
documents for the entity; (12) to change the right of holders of
equity securities with respect to the calling of special meetings of
holders of equity securities; and (13) to change, add, or delete any
rights, preferences, privileges, or restrictions of, or on, the
outstanding shares or memberships of a mutual water company or other
corporation or entity organized primarily to provide services or
facilities to its shareholders or members.  Changes in the rights,
preferences, privileges, or restrictions of or on outstanding equity
securities do not materially and adversely affect any class of
holders of equity securities within the meaning of this subdivision
if they arise from (i) the addition to articles of incorporation of
the provisions described or referred to in subdivision (a) of Section
158 upon the conversion of an existing corporation to a close
corporation pursuant to subdivision (b) of Section 158, (ii) the
deletion from the articles of incorporation of the provisions
described or referred to in subdivision (a) of Section 158 upon the
voluntary termination of close corporation status pursuant to
subdivisions (c) and (e) of Section 158, (iii) the involuntary
cessation of close corporation status pursuant to subdivision (e) of
Section 158, or (iv) the termination of a shareholders' agreement
pursuant to subdivision (b) of Section 300.
   (f) Any stock split or reverse stock split, except the following:
(1) any stock split or reverse stock split if the corporation has
more than one class of shares outstanding and the split would have a
material effect on the proportionate interests of the respective
classes as to voting, dividends, or distributions; (2) any stock
split of a stock which is traded in the market and its market price
as of the date of directors' approval of the stock split adjusted to
give effect to the split was less than two dollars ($2) per share;
and (3) any reverse stock split if the corporation has the option of
paying cash for any fractional shares created by such reverse split
and as a result of such action the proportionate interests of the
shareholders would be substantially altered.  Any shares issued upon
a stock split or reverse stock split exempted by this subdivision
shall be subject to any conditions previously imposed by the
commissioner applicable to the shares with respect to which they are
issued.
   (g) Any change in the rights of outstanding debt securities,
except the following if they substantially and adversely affect any
class of securities:  (1) to change the rights to interest thereon;
(2) to change their redemption provisions; (3) to make them
redeemable; (4) to extend the maturity thereof or to change the
amount payable thereon at maturity; (5) to change their voting
rights; (6) to change their conversion rights; (7) to change sinking
fund provisions; and (8) to make them subordinate to other
indebtedness.
   (h) Any exchange incident to a merger, consolidation, or sale of
assets, other than a rollup transaction (as defined in Section
25014.6), in consideration of the issuance of equity securities of
another entity or any entity conversion transaction which meets the
following conditions:
   (1) The exchange incident to a merger, consolidation, or sale of
assets or the entity conversion transaction, had the exchange
transaction involved the issuance of a security in a transaction
subject to the provisions of Section 25110, would have been exempt
from qualification by subdivision (f) of Section 25102, without
giving effect to subparagraph (3) thereof, and either of the
following is applicable:
   (A) (i) Not less than 75 percent of the outstanding equity
securities of each constituent or converting entity entitled to vote
on the proposed transaction voted in favor of the transaction, (ii)
not more than 10 percent of the outstanding equity securities of each
constituent or converting entity entitled to vote on the proposed
transaction voted against the transaction, and (iii) each constituent
or converting entity whose security holders are entitled to vote on
the proposed transaction is subject to a state statute that has
provisions for dissenters' rights for holders of equity securities
entitled to vote on the proposed transaction that do not vote in
favor of or voted against the transaction.
   (B) (i) The transaction is solely for the purposes of changing the
issuer's state of incorporation or organization, or form of
organization, (ii) all the securities of the same class or series,
unless all the security holders of the class or series consent, are
treated equally, and (iii) the holders of nonredeemable voting equity
securities receive nonredeemable voting equity securities.
   (2) The commissioner may, by rule, require the acquiring or
surviving entity to file a notice of transaction under this section.
However, the failure to file the notice or the failure to file the
notice within the time specified by the rule of the commissioner
shall not affect the availability of this exemption.  An acquiring or
surviving entity that fails to file the notice as provided by rule
of the commissioner shall, within 15 business days after demand by
the commissioner, file the notice and pay to the commissioner a fee
equal to the fee payable had the transaction been qualified under
Section 25110 or 25120.
   (i) Any exchange of securities in connection with any merger or
consolidation or sale of corporate assets in consideration wholly or
in part of the issuance of securities or any entity conversion
transaction under, or pursuant to, a plan of reorganization or
arrangement which pursuant to the provisions of the United States
Bankruptcy Code has been confirmed or is subject to confirmation by
the decree or order of a court of competent jurisdiction.
  SEC. 19.  Section 25120 of the Corporations Code is amended to
read:
   25120.  It is unlawful for any person to offer or sell in this
state any security (a) in an issuer transaction in connection with
any change in the rights, preferences, privileges, or restrictions of
or on outstanding securities or (b) in any exchange of securities by
the issuer with its existing security holders exclusively (c) in any
exchange in connection with any merger or consolidation or purchase
of assets in consideration wholly or in part of the issuance of
securities or (d) in an entity conversion transaction, unless the
security is qualified for sale under this chapter (and no order under
Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification) or unless such security or transaction
is exempted or not subject to qualification under Chapter 1
(commencing with Section 25100) of this part.
